This invention relates to order display in a securities market.
Securities markets such as those that trade equity securities can be of several different types. One type is a multi-dealer market in which two or more dealers make a market for a particular equity security. One example of a dealer market is, “The Nasdaq Stock Market®.” The Nasdaq Stock Market® is an electronic market for electronically trading equity securities through market makers, also known as dealers. In the Nasdaq Stock Market®, a market maker is effectively required to supply four pieces of information to the electronic market. That is, the market maker is required to have a bid quote or the price that the market maker will buy a security at and an offer quote or the price that the market maker will sell a security at. The market maker also provides a quote size or the number of shares for each of the bid and offer quotes. The market maker is required to maintain a two-sided market.
Before the Securities and Exchange Commission's Order Handling Rules took effect in January 1997, the market maker represented the bid and offer quotes for a proprietary account. With the Order Handling Rules implemented, if the market maker has a customer order that is better than the market maker's proprietary interest, the market maker must now reflect that customer order publicly. This is accomplished by reflecting the customer's order in the market maker's proprietary quote.